Ethical Issues in Mergers and Acquisitions MER GERS AND ACQUISITIO NS-AN OVERVIEW : The phrase mergers and acquisitions

(M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company (in a given industry) grow rapidly without having to create another business entity. In legal terminology, mergers and acquisitions can be defined as follows: ‡Merger: A full joining together of two previously separate corporations. A true merger in the legal sense occurs when both businesses dissolve and fold their assets and liabilities into a newly created third entity. This entails the creation of a new corporation. ‡Acquisiti on : Taking possession of another business, also called a takeover or buyout. It may be share purchase (the buyer buys the shares of the target company from the shareholders of the target company. The buyer will take on the company with all its assets and liabilities. ) or asset purchase (buyer buys the assets of the target company from the target company). Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as an acquisition. Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directors, employees and shareholders. It is quite normal though for M&A deal communications to take place in a so called 'confidentiality bubble' whereby information flows are restricted due to confidentiality agreements (I.A., 2006).

Managers of firms that enter foreign countries through their M&A strategies need to be aware of these issues. Host governments may present additional challenges and opportunities in the international context. Such differences may be rooted in culture and tradition that may prove to be difficult to recognize and/or understand. such as when one firm invests heavily in employees and the other focuses mainly on shareholders or customers. Managers are confronted with some of the most complex ethical dilemmas in their daily . what counts as fair and proper accounting and taxation. Some really vexing issues surface in the course of these deals. she notes. In M&A¶s that cross borders. these issues can be particularly difficult because of cultural and legal differences. For example. internal organizational ethics has received relatively less attention.(Paine) A secondary category of ethical issues.ETHICAL ISSUES IN MERGERS AND ACQUISITIONS: Mergers and acquisitions involve a wide array of ethical questions. what restrictions to place on insider use of information. for example. involves questions arising from the actual M&A. managers of the merging companies have to wrestle with what is fair to the different sets of employees and what will help build a cohesive organization with a single set of ethical standards going forward. in the United States an airline cannot have more than 25% foreign ownership. and how to treat employees who may lose their jobs. Management must decide. Governments may have currency laws that prevent a foreign-owned firm from taking money out of the country. Governments tend to protect their national interests when dealing with foreign-owned firms. when to disclose plans for the merger. For example. SCOPE AND OBJECTIVES: Most discussions of business ethics focus on the interaction between organizations and the external stakeholders. Labor laws may be different from those in a firm¶s domestic market. On the other hand. A mismatch can sometimes lead to serious problems. some of which relate to the degree of "fit" between the value systems of the merging firms. the legal definition of 'redundant employees' varies widely as do requirements for severance arrangements. transaction. In the face of such differences.

human resource ±related responsibilies. deontological. METHODOLOGY: ‡ We will use a case based approach to analyze the effects of mergers and acquisitions and various ethical issues arising out of it. ‡ We will apply ethical theories (teleological. One of the primary objectives of this paper would be to address questionable management decisions and tactics from ethical perspective. . etc) to weigh the various options available to the management during Mergers and Acquisitions. utilitarian. The paper will also cover the process of the transactions involved in M&A as these transactions offer many possibilities to show ethical as well as questionable behaviour on the part of all the parties involved. Such internal quandaries can be especially problematic during mergers and acquisitions.

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